but even more and more europeans are rethinking the pillars of the modern nation state there is wide agreement that the sovereignty of states must. good afternoon welcome to capital account i'm laurin the store here in washington d.c. these are your headlines for monday december tenth two thousand while gold rises said some headlines today citing italian technocrat prime minister mario monti has plans to resign also expectations of easing regardless it was actually fairly so why has the yellow metal been trading sideways for pretty much the past year and a half as the s. and p. five hundred have gained a very respectable twenty five percent a year from commodities legend eric sprott about that and about silver to u.s. and u.k. regulators have reportedly published a joint paper they wrote about it on the pages of the op ed pages rather of the financial times to deal with too big to fail banks that need to while they held its

first cross border plan it includes losses for shareholders removing senior management and converting debt into equity to provide capital now capital is one solution to mitigate the liability of massive credit expansion only we had hard money though we'll break that down for you where the day and while we're on all that glitters check out this trip to the vault. it's enormously impressed see that it's a big road like a movie where the dead go to city ways to put people to remember it's. not a funny video you'll never guess where that was we'll tell you and have more in loose change let's get to today's capital account.

we have plenty of news events like some i mentioned in headlines to create uncertainty in this economy to send investors running to safe havens and an asset we've seen react in the past gold sure it's up a little today but looking back it's nothing like this terror it was on. it has traded at another record one thousand six hundred forty five dollars an ounce gold coast to the new record high of one thousand eight hundred fifteen dollars an ounce in the one place people are going he's gone gold is trading solidly above eighteen hundred dollars an ounce it's now more than fifty percent in the last year remember all that that was in the summer of two thousand and eleven surrounding the u.s. debt ceiling debate and the downgrade and gold even top one thousand nine hundred dollars an ounce at some point way up here while you can see it's come down from there and it's pretty much where it was about

a year ago despite the types of continued news events that would drive investors to it not to mention according to the world gold council central banks will buy more than five hundred tons of gold this year that's up from four hundred sixty five tons in two thousand and eleven a new high so what's happened there and the recent period aside which we just addressed we'll get to that you can see what preceded that was more than a decade's long decade long really bull market in gold ok what we can't see behind this though is how much of this has been driven by the types of factors that we talk about every day ok q we debt downgrades that versus how much is driven by issues such as the twenty year bear market in gold that preceded this run with the structural changes of supply that happened over a very long period of time forcing the inevitable price adjustment that were perhaps seeing it today so earlier i spoke to eric sprott c.e.o. of sprott asset management and started by asking how he's weighed those factors over the years here's what he said. when i first got to go gold in this serious

matter which was two thousand the century right at the bottom of the market and i was sort of guided by a book written by. a gentleman who called the million nine hundred ninety eight gold book is named for a better job and he served my sort of. like that the central banks had been supplying the market and suppressing the price of coal can't his conclusion was that there really was more demand than supply already back in one thousand nine hundred eighty eight eight hundred tonnes a year and the course the point of reference is the size of the gold market which is about four thousand tonne but you know i think he's probably got a point here looks to me like there's more demand than supply and so that's what brought me into a goal that in the fact that i i felt very much like we were going into a bear market well before the nasdaq peaks and there's only one way to survive in

that market that stone real assets so those two things were kind of my guiding principle. we have been aided and abetted along the way by the financial crisis and the reaction to the financial crisis than the injury mentioned one of the to be seeing conservatorships l.t.r. arose just massive money printing to save the financial system to bank runs which would cause people to go to google so these are all created tailwinds that make one believe that the price of gold can still go many times higher than it is today ok so then let's talk about because i want to ask what's changed in the landscape and the dynamics perhaps in the last year and a half because in the summer of two thousand and eleven following the u.s. debt downgrade of course the euro zone crisis was still a major concern and every day it seemed like all it was hitting a new record i can remember just watching it reporting on and going whoa what is going on i mean i went from sixteen hundred to one thousand eight hundred less than

three weeks and now in this past year and a half what has hasn't moved much what has changed. well. you have to be honest circumspect about what might really be happening here and that it happens to be my view that when the crises are evident the powers that be do not want the crisis to be evident knowing that the gold and silver are in essence the canary in the gold mine i think there is pressure brought to bear on gold prices and lauren we recently about three months ago issued a report saying or asking the question do this western central banks have any gold left and we asked that question because our own analysis showed that on average that we we can see and increase in demand from two thousand to today of about twenty five hundred times a year and if you could possibly accept that we might have had an eight hundred tonne shortage back in two thousand we now have

a forty three hundred down shortage in a four thousand ton market and you have to ask as well where's the. all coming from for all these new entrants as you pointed out have been lots of changes in the last year they got a huge demand that's happened in china. i think of the huge change in central bank buying that's going on non-western central bank online and this is the gold markets a market where there's life been flat for twelve or thirteen years now so how do you how do you have new entrants coming into a market that's been in balance for twelve years and i can only imagine that central banks continue to lease gold into the market to keep the price under control so you're suggesting and you think the key factor here is that central banks are essentially manipulating the gold price and that's not suppressing the price right now i believe that central banks are continuing to lease coal into the market so we've seen examples recently where you know they asked the blonde his bible where's our gold and like the seventy percent germany reno were well in and

said they knew where the rest was but of course we don't know what's happened to that goal that might be in london or new york and i probably the most revealing thing is when the austrian was asked where our world was and of course it was in london new york and the he then but the finance minister said but we're earning income on leasing the goal and of course i can when you least gold the physical gold disappears and you know somebody one of the gold backed with bought or gold trust or that the chinese are the envy of but you're not going to get it back and so i think these central banks are living in some kind of world where they think oh i will just want to you know are billion bank and asked for the gold back that they're going to get it i think that that gold is long gone wild well then do you think just thinking about the price do you think that still the price will come down from where it wasn't those highs in two thousand levon it still has further to go driven by some these factors you're talking about or do you think it's going to head up from here. well lauren as i said in the write up do they have any legal

left to sell that mean it was a time back in two thousand we thought they might have had i think it was thirty two thousand tons. better proceed work suggested it might already be down to eight hundred thousand tons we've done it for as much as twenty five hundred times a year of excess selling i got to believe there can't be that much left in the system so do i expect the price to go up yes i do it's going up for twelve years or oh it's a pretty nicely this year i think there's a real valid reason for the central banks to try to limit the price of gold because obviously their policies verge on the ponzi here when you just end up buying all of your country's debt with your honor and you sir are doing that and those of us who would watch this would look for some toll as to whether the system is buying into or not that we all know that would be the price of gold and silver and they don't

want the tale to be read in other words if we all saw the price of gold and silver hitting new highs i think we realize that the policies of the central planners were likely to cause hyperinflation ok so let me ask you war about the central planners because they do think that they have been effective in some regards and in doing what they want to achieve so in the same time that we're talking about where call it has really come down kind of stay the same in the same place. is that some ten or twenty second excuse me a few thousand of an the s. and p. five hundred has risen twenty five percent so we're hearing here for after two thousand and eight many would argue the fundamental problems that got us into the two thousand a crisis have not been addressed so does this prove that not only can the fed can keep equity prices higher but that maybe if you're an investor sitting there and you're looking at this and you're saying you know i just missed this rally maybe the fed and central banks really can't keep any prices higher and if they're committed to doing so which they certainly seem to be shouldn't i just get in the

thing people are sitting there saying this now. well i think you've learned what you have to do is you have to look at the long run impact again and who knows when it finally breaks but i mean i look at the bed buying let's say ninety percent of the bond is totally ludicrous the japanese is probably buying more than one hundred percent of the budget it's grossly impractical and of course the result of these these purchases that drive interest rates almost and nothing but it's an artificial rate it's not where bond should be trading and you can't do it forever and you know when the when the fed says you know they're going to work their way out of all the bond purchases which they used to talk about i mean there's absolutely no way you know that anyone could imagine that they would ever be able to deal with their balance sheet i think they're in for the long run. yes i think by driving interest rates lower if you have a positive tendency on stock prices but if i think we all think that the interest rate at one or two percent for bonds is ludicrous that in turn causes stock

valuations to be ludicrous because if we start moving up in interest rates here the whole situation in all countries from a deficit perspective starts changing markedly here and you have to pay market interest rates on your lawns and not some illusory temporary rate now but at the same time let me just play devil's advocate for a moment because the private sector is so indebted to so why couldn't we see treasuries last at this level for say i don't know another decade without imploding because the private sector the leveraging could arguably continue another ten years and that could keep public sector debt relatively attractive. well i don't know that we would call public sector debt attractive when i hear you part but then when the central banks by ninety percent of it might be a track that the central bank it's obviously not attractive the chinese anymore and it likely not attractive to any non western central bank anymore as we see most

a lot of these central banks buying gold i mean it doesn't take much to see through the long run the impact of the policy here we've seen this massive change in what no on western central banks are doing in terms of diversifying their their reserves out of government debt into physical things predominantly in china but also in many other countries so it's not a policy that anyone could imagine is sustainable here not without creating some kind of serious inflation you can't just keep printing money without there being inflation and it's sort of come to my mind that the reason they control the price of gold silver is that's because the first place everyone would go you're not going to go and buy wheat in a whale and things like that are going to buy gold and silver so if you keep the price of gold and silver controlled you probably prevent what would appear to be the start of an inflationary era and that's why i think they've leaned on gold and

silver in particular. it's food for thought and still ahead of why is eric sprott thrilled to larn that we don't talk about silver all that much on the show that's ahead plus which metal does he think is so last decade and which does he think is going to perform this decade find out after the break but first the closing market numbers. lola.

little. little. you know how sometimes you see a story and it seems so for langley you think you understand it and then you glimpse something else and you hear or see some other part of it and realize that everything is are you don't know i'm tom harvey welcome to the big picture. the worst you're going to take a long flight out to the day a radio guy and club available minutes from a cricket club with a walk in the large quote we're about to go good you've never seen anything like this on cold.

all right we're talking about precious metals before the break we are focused on coal but we don't want to over look silver ok i know we don't give it as much play but it is one of eric sprott forte's so we were sure to ask him about it and to be fair come on it is a lot less money out of your pocket to get into gold or excuse me get into silver so you know does that make it a more attractive investment to say someone like me who maybe can't shell out big bucks for gold while here is there a spot. i have to admit we don't actually have ourselves as much as we do called but i know it's layer special teams i actually think i've heard you say you're more bullish about selves are obviously i want to know why i also want to know what are the unique factors that move this market that are completely different from gold i

know for one it's a lot smaller i know that with the ply a lot of it comes on from mines that are dedicated silver mines and also some of it of course has to go to industry is. well earned first of all i'm very happy you don't spend much time on silver up oh god i'll pat myself on the back now tell me why. statement it's a statement that no people don't look at silver we have these silver trusts and i go around and see various people in similar institutions and not many people spend any time looking at something which i regard as a great thing which means you know it can only change to the better what are the key things that i look at and someone i would encourage people to check out the data i mean if you go to the us mint website you'll find both this year and last year that the amount of dollars invested in silver and gold coins is the same now there is it that makes for an interesting thing on the physical side

because as you know the price is trading at fifty three to one ratio which means we're buying fifty three times more silver and gold for investment purposes fifty three while the a bailable of silver for investment versus gold for investment is a ratio of about seven to one is what you can put him but people are buying it fifty to one when we are short silver trust which we just closed on a deal we raised three hundred twenty million in the last transmission or so over to you the previous dream as you recall below which is about two months ago we raised three hundred forty nine million let's just say for all intents and purposes it was about the same another and we bought fifty times more silver for investment purposes then. we did go well all i can tell you is when it's available seven for one the investor can't keep buying it at fifty to one before something happens ok interesting so then i do want to ask though because like i said we talk about gold

for people that watch this show who perhaps aren't the more well endowed investors in our audience but they may want to own precious metals they may think silver is a more affordable way to do so but i also know that silver is very volatile or at least it has been so is this a good type of investment for the type of person who wants to own precious metals that can afford to buy gold or not because there are these other factors that make it volatile. well you know there's lots of factors that make a vote on the loading all the paper trading including potential manipulation the silver bracers lawsuits that are filed that anyone can go on the manipulation the silver price in two thousand and eight there's a c a d c investigation where one of the commissioner said there is obvious evidence that there might be fraudulent activity going on in the silver market so with that in mind you might say well maybe those markets i'm looking at that are volatile as they are needn't be that. i would only say this i think silver will be the

investment of this decade where as gold was the investor the elastic so where those reform go it's more volatile however and i kind of take a long term view on these things if i was to give people advice what do you do with your money i believe that silver will trade down to a sixteen to one ratio to gold so let's imagine that two years from now. three thousand dollars that would imply that the price of silver could almost be two hundred dollars so your return would be three hundred percent more if you have the patience and you can stomach the ball whatever the i think silver will be by far the better investment going forward. will leave it there with eric sprott c.e.o. of asset management.

time now for word of the day where we break down a financial term for our smart viewer but just not the expert and given all this talk about precious metals with eric sprott we thought we'd break down hard money sometimes referred to as some money now we've heard hard money refer to in many different ways here's just one example. bulger is a hard money dollars central banker probably the greatest central banker in our recent history but what does it mean that volcker is a hard money central banker and is that an oxymoron well first let's take a look at what hard money means ok it's money that's backed by hard tangible lasting material so as to retain its relative value over time does acting as a reliable store a value you know it's pretty intuitive for example before nine hundred seventy one the u.s. dollar was redeemable for a set quantity of gold this meant the dollar was sound or sound or currency certainly than it is now now advocates of

a gold standard or some other form of commodity based hard currency point to do huge growth in debt take a look at that total public debt as well as other liabilities as a direct consequence of having money that is it tied to anything tangible and whose value fluctuates with the whims of you know who central bankers this is otherwise known as of course currency now in a world of sound money debts that cannot be repaid will not be repaid and write downs and bankruptcies must occur and debts cannot simply be papered over through this money printing and inflation now even thomas jefferson to go back a while in the seven hundred eighty s. wrote about the need for understanding the value of the dollar he said if we determine that a dollar shall be our unit we must then say with precision what a dollar is and in the seven hundred dr rhode island issue fast amounts of unbacked paper money george washington wrote to the former deputy governor of rhode island and said paper money has had the effect in your state that it will ever have to

ruin commerce oppress the honest and oppress the honest and open the door to every species of fraud and injustice to it really just does show how far we've come where now in the world of money ah ha kodesh policymaker at a central bank like volcker is referred to as. hard money central banker and that my friends is hard money. all right let's wrap up with loose change dimitri we can delve more of this fun video that we showed at the beginning of our show have you ever wondered what three hundred fifteen billion dollars in gold bullion looks like well

a certain chemistry professor whose name is martin poliakoff visited the gold vault at the bank of england how did he get that i got that access to find out here's a look. i've never seen so much go in front of the scene so much of any elements so we're standing here and each show here it's got a ton of gold which is worth thirty five million pounds. so a fifty six million dollars not taken out a lot of space i'm just so impressed that this guy got access to the bank of england when you think we'll see this in the new york fed well i never know i mean they did have an audit you know ron paul wanted a real legitimate audit park lot of they might do something like that i know there are a lot of people out there that have. vast especially about how much gold is in the vaults but i don't think the issue is if the physical gold is is there in the sense

that it is a lease and also how many times has how many people own or have believe that they own the claim to a certain gold bar with that serial number right how many times have been. right so that's the kind of the question with gold there's still games that can be played with paper gold and that's that's what data harp on about all the time. but murphy chris paul those guys go beyond the truth by the way they're going to be in studio guys to go so right you know what i think was amazing because i haven't actually ever been in a gold vault which i would like to play on my bucket list maybe one day i'd like to own one but some gold and one at least but i thought it was very interesting that i didn't realize that gold doesn't tarnish it doesn't corrode i mean it stays in the pristine condition for years and that's what it's like such good money because it's . it has all the basic quantities of money and it's the visible so you can always break it out of the investment was small quantities and no it doesn't so all the gold that's ever mine in existence is still around today which is why every time

you supply grows it's just part of this giant cube that we have globally which is i . forget how many hundred seventy three. i'm not sure i mean i don't know how many times as a lot but still nothing to match up with the amount of paper liabilities out there yes because of paper liabilities it's not just currency i mean other liabilities we have food stamps we have government title net entitlements and as the u.s. unemployment rate improves as we've seen in recent months. take a look at this other trend the amount of americans becoming eligible for food stamps has increased to a record forty seven point seven million americans. manton is one of a record forty six million americans now on food stamps an increase of twenty million people since the great recession in two thousand and seven according to the u.s. department of agriculture forty one percent of food stamp recipients live in households

where someone does earn a paycheck the so-called working poor and the very sad part about the recent data we got from the u.s.d.a. is that while we've been somewhat excited or seen an exciting reaction to some of the recent non-farm payroll numbers that have come out from the b.l.s. which show you know some decent job creation that. pales in comparison to the number of people that have been added to the food stamp rolls that are scary though it's very alarming that that really gives this completely dismaying picture that is totally at odds with any optimism about one hundred thousand jobs created when you're adding six hundred thousand people to food stamps and at the same period of time and i agree and i think we're at a time when i want to participate in tolls on this one ok well none of them will leave it there because that is all we have time for thank you so much for watching be sure to come back tomorrow and the meantime you know you can follow me on twitter at lauren lester you can like our facebook page and there it is right there you can catch any show you missed catch our web exclusive the x. are with kevin phillips which he posted on sunday it's there at youtube dot com

slash capital account you know you can watch us in h.d. only on hulu there is the address and we will see you tomorrow. the issues that so much is always on the singles i want to listen to the whole you know the real number one still separate learning more and more europeans are rethinking the pillars of the modern nations to do is why agreement to the sovereignty of states most. of the.

wealthy british soil. is not on line with your. markets. find out what's really happening to the global economy with max concert for a no holds barred look at the global financial headlines tune into kinds a report on our culture is that so much i was about to face and i think one of them to forgive it really can be will separate money more and more europeans are rethinking the pillars of the modern nation state there is wide agreement that the sovereignty of states must.